When is misconduct ‘gross’ and what compensation can be claimed for wrongful dismissal?

January 27, 2017

Introduction

In the wrongful dismissal case of Adesokan v. Sainsbury’s Supermarkets Limited [2017] EWCA Civ 22, the Court of Appeal grappled with the question of what the “gross” in “gross misconduct” means.  In obiter, the Court of Appeal also dealt in the briefest of terms with the question whether damages for wrongful dismissal are limited to the notice period.

 

Facts

The facts can be shortly stated. The Appellant was a Regional Operations Manager, responsible for twenty stores. Sainsbury’s operates an analytical process called the Talkback Procedure, through which staff engagement is quantified and assessed. On a strategic level, Sainsbury’s values this analysis to help to identify any issues with staff motivation – motivated staff provide better customer service, leading to greater customer loyalty.  The Appellant worked alongside an HR partner, Mr Briner, who sent out an email to five store managers suggesting they focus on ensuring their most enthusiastic staff fill in the survey rather than ensuring 100% of staff complete the survey. This could, of course, skew the results to present a more positive outlook than the true position. The Appellant was not party to the sending of the email. He asked Mr Briner to clarify to recipients what he meant in the email but took no further action. The email was then forwarded anonymously to Sainsbury’s CEO, who instigated an investigation. Whilst it was accepted the Appellant was not complicit in the sending of the email, he was summarily dismissed for gross misconduct. In dismissing, reliance was placed on the Appellant’s accountability for the Talkback Procedure, his awareness of Mr Briner’s actions and his failure to take adequate steps to rectify this. The dismissing officer explained this demonstrated gross negligence, tantamount to gross misconduct.

 

At the High Court

At trial, HHJ Gore found the Appellant was not dishonest and had not made a conscious decision not to take steps to eliminate the effect of Mr Briner’s email. Notwithstanding this, he concluded the Appellant’s actions amounted to a serious breach of policy or procedure, and that tested objectively they seriously damaged the trust and confidence in the Appellant so that Sainsbury’s could not be regarded as obliged to continue to employ him. Accordingly, the Judge upheld the finding of gross misconduct.

 

Court of Appeal judgment on the meaning of ‘gross misconduct’

Whilst there were three grounds of appeal, the Court of Appeal gave consideration principally to the first, namely whether the misconduct was gross.  Relying heavily on the speech of Lord Jauncey in Neary v. Dean of Westminster [1999] IRLR 288, Elias LJ (giving the lead judgment, with which Longmore and David Richards LJJ agreed) emphasised the focus must be on the extent of damage to the relationship between the parties. Conduct whose gravity or weight undermines the employer’s trust and confidence in the employee and renders the employee unfit to continue in his job may amount to gross misconduct for which summary dismissal may be justified.  Such conduct is not restricted to deliberate or dishonest acts and may extend to acts of gross negligence. This is a question of fact for the first instance court or tribunal, and accordingly the latitude to the Court of Appeal to interfere with the first instance decision is limited.

Elias LJ did place some boundaries on circumstances where gross negligence amounts to gross misconduct.  Where the failure to act did not amount to an intentional decision to undermine the employer’s policy or to act contrary to it, a judge should not readily find the act was of such gravity as to justify summary dismissal. In the present case, however, a number of considerations entitled the Judge to reach his decision and required the Court of Appeal to uphold it:

  • The Appellant was responsible for ensuring successful implementation of the Talkback Procedure.
  • It was a procedure which played a critical role in the culture of Sainsbury’s.
  • The actions the Appellant took to remedy Mr Briner’s undermining of that policy were insufficient.
  • Given the policy’s significance the Judge was entitled to find this a serious dereliction of duty which undermined trust and confidence in the employment relationship.

 

Court of Appeal judgment on compensation for wrongful dismissal

Alongside the question of whether the Appellant’s negligent acts amounted to gross misconduct, the Court of Appeal heard argument on the extent of compensation claimable following a finding of wrongful dismissal. As the reader will know, in Gunton v. Richmond-Upon-Thames London Borough Council [1981] Ch 448, the Court of Appeal held a wrongfully dismissed employee’s compensation claim to be limited to losses incurred during the notice period. Practitioners had considered that principle to be in some doubt following the Supreme Court’s decision in Geys v Societe Generale [2013] 1 AC 523 that a repudiatory breach of an employment contract does not terminate the contract unless the other party elects to accept.

It was argued before the Court of Appeal that the consequence of the Supreme Court’s decision in Geys is that where a summary dismissal is wrongful (though not unfair) and is therefore in repudiatory breach, the contract continues unless and until the employee accepts the breach, wages continue to fall due (so long as the employee remains ready, willing and able to work), and potential compensation for wrongful dismissal thus includes both unpaid wages as a debt and notice pay from the point of acceptance of the repudiatory breach (which could fall as late as trial) as damages.

As the Court of Appeal decided to dismiss the appeal on the gross misconduct point, questions about the extent of damages did not arise.  Elias LJ dealt, however, in obiter, very briefly with the arguments about Geys and Gunton. He concluded that the two decisions were not inconsistent, and that Gunton thus remains binding on the Court of Appeal unless the Supreme Court decides otherwise. In particular, he noted that in Geys Lord Wilson specifically stated the Gunton principle was not in issue before the Supreme Court (Elias LJ refers to paragraph 78 of Geys, but this is a typographical error and should be paragraph 79).

 

Lessons

Gross Misconduct

On a practical level, there are a number of points of advice that can be taken from the gross misconduct part of the Court of Appeal’s judgment and passed on to business clients:

  • Contractual definitions of gross misconduct should be reviewed to ensure they include acts of gross negligence and actions which undermine trust and confidence in the employment relationship. Whilst a dismissal for gross misconduct on these bases may succeed without this being spelt out in the contractual definition, definitional clarity is always helpful in persuading a tribunal that the act falls within the ambit of gross misconduct.
  • Where consideration is being given to whether to dismiss for gross negligence by a failure to act, given the emphasis in Adesokan on weight and gravity, the decision-maker should focus particularly on:
    • The importance to the company of the policy undermined;
    • The potential ramifications of the failure to act;
    • The role of the employee vis-à-vis that policy – the greater the responsibility the easier to justify a finding of gross misconduct.
  • If the underlying policy documents themselves spell out the importance to the company of the proper application, or honouring, of a particular policy, that will assist with providing a compelling narrative to justify a gross misconduct dismissal for gross negligence in circumstances such as those in Adesokan.

 

Compensation

In respect of the position on compensation, Adesokan leaves the law on the effect of repudiation of employment contracts somewhat confused. For the purposes of determining the date of termination, they are treated like other contracts as being terminated on acceptance of the repudiatory breach, but unlike other contracts compensation is restricted to the notice period. Although the Supreme Court could not now resolve this confusion in Adesokan, there must be some hope of it being resolved at some future point.

If advising a summarily-dismissed employee whose level of pay is such that a claim might be brought for wrongful dismissal in the civil courts rather than as part of an employment tribunal claim (and is therefore subject to a 6-year limitation period rather than 3-months), it is still worth writing to the employer to assert that the dismissal did not lawfully terminate the contract and is not accepted as terminating, and to make clear that the employee remains ready, willing and able to work. Whilst Adesokan will have strengthened the confidence of employers that any debt claim for unpaid wages post-summary dismissal will fail, the prospect of the Supreme Court overturning Gunton at some point in the six years post dismissal (i.e. within the limitation period) might still tempt some risk averse employers to pay notice pay so that there can be no question of a continuing wages claim.

If advising the employer, reliance should be placed on Adesokan as reaffirming that no wages fall due irrespective of whether or not a court or tribunal finds the dismissal wrongful.

The judgment is available here

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